March 2013

The Office

Corporate Locations (HK) Limited License No. C-042434

Tel +852 2251 8767 / info@corporatelocations.com.hk / www.corporatelocations.com.hk

Hong Kong | Singapore

A review of the Hong Kong office market

Recent Clients Winsmart Shipping (East Exchange Tower)

Crown Maritime (Dah Sing Financial Centre)

HSH Nordsbank (Central Plaza)

Fung Wong Ng & Solics (Shanghai Invst Bldg)

Sart Underwriting (Wing Hang Finance Centre)

TR Advisors (8 Wyndham Street)

Silverhorn Investments (100 QRC)

Evans & Peck (248 Queen’s Road East)

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The rates quoted in this review are not the landlords asking rates but are just our estimated guide on target effective rates and are subject to change at any time.

The information in this publication should be regarded as a general guide only. Whilst every effort has been made to take care in its preparation, no representation is made or responsibility accepted for its accuracy.

Supply / Demand Activity in this location has been restricted by the limited supply, hence the number of relocations here has been modest. In Sheung Wan, GK Holdings finally completed their move to the penthouse floors of Li Po Chung Chamber from Cosco Tower. Calypso Technology has just moved into The Center and Walton International also moved here recently from Central Plaza.

Sheung Wan / Central West / Admiralty

*All rents quoted are estimated target effective rates subject to negotiations and are not the landlords quoted figureArea Definitions: G - Gross (70% efficiency), L - Lettable (80 - 85% efficiency), N - Net (100% efficiency)

$48 - $53 psf*

The best quality space and widest choice of units in this location can be found in Cosco Tower and The Center.

In Admiralty, Poly Auctions have just set up offices in One Pacific Place. Siberian Mining Group moved from 8 Queen’s Road Central to Admiralty Centre and new tenants to Bank of America Tower include Transpac Capital from Hutchison House and Fortis Mining.

Target Effective Rates per sq ft

122 Queen’s Road Central $3269 Jervois Street $20181 Queen’s Road Central $30-40Beautiful Group Tower $36BOCG Insurance Building FullChina Insurance Group Bldg $38Cosco Tower $45-53EIB Centre $25-27Golden Centre $32

Sheung Wan / Central West Admiralty

Guandong Investment Bldg $30Infinitus Plaza $43 ING Tower $32-36Kai Tak Commercial Bldg $26Li Po Chun Chambers FullNan Fung Tower $34-37Pacific Plaza $14-16Shun Tak Centre $50The Center $50-75

Unicorn Trade Centre $33V. Heun Building FullWing On Centre $46Yardley Commercial Building $32

Admiralty Centre T1 & T2 $43-50Bank of America Tower $53-63CITIC Tower $68-75 Far East Finance Centre $53Fairmount House FullHutchison House $45-60Lippo Centre Tower 1 & 2 $43-53One & Two Pacific Place $98-105Three Pacific Place $85-90United Centre $35-38

Cosco Tower Grand Millennium Plaza

Units from 4,000 - 20,000 sq ft (G) $32 psf*122 Queen’s Road Central Units from 2,400 - 4,800 sq ft (G)

$43 - $50 psf*Admiralty Centre Tower 1 18 Harcourt Road Units from 3,147 - 11,760 sq ft

$43 psf*Infinitus Plaza 199 Des Vouex Road Central

Units from 4,000 - 12,000 sq ft (G)

$45 - $60 psf* Hutchison House 10 Harcourt Road Units from 1,430 - 20,293 sq ft (G)

$50 - $75 psf*The Center 99 Queen’s Road Central

Units from 1,620 - 26,183 sq ft (G)

*All rents quoted are estimated target effective rates subject to negotiations and are not the landlords quoted figureArea Definitions: G - Gross (70% efficiency), L - Lettable (80 - 85% efficiency), N - Net (100% efficiency)

Central

8 Queen’s Road Central $788 Wyndham Street $40-509 Queen’s Road Central $60-65100 Queen’s Road Central $65ABC Tower (50 CRC) FullAlA Central $110-120Alexandra House Full Aon China Building $60Bank of China Tower $95-98Baskerville House FullCCB Tower $130Chater House TBCCentral Building FullCentral Tower $80-83Cheung Kong Center $90-110

Target Effective Rates per sq ft

Chuang’s Tower $45-48Citibank Tower $75-80Citibank Plaza - ICBC Twr $75-80Club Lusitano Building $50-54Dina House/Ruttonjee Ctr $45-52Edinburgh Tower TBCEntertainment Building $60-70Euro Trade Centre $42-45Fung House $42-45Gloucester Tower $125-135Henley Building $70Hip Shing Hong Centre FullHK Diamond Exch. Centre FullJardine House TBCKinwick Centre $40

Central / Economy Range ($38 - $48 psf)

LHT Tower $85-90 Lucky Building $33Lyndhurst Tower FullMan Yee Building $65-75Nexxus Building $70-73New Henry House $68New World Tower 1 $55-62One Exchange Square TBCTwo Exchange Square TBCThree Exchange Square FullOne IFC $125Two IFC $125-140Onfem Tower FullOn Hing Building $35Pacific House $46

Prince’s Building $112Printing House $55Prosperity Tower $60-63Shun Ho Tower FullSt George’s Building $85-88St John’s Building $45-50The Centrium $43-51The HK Club Building $95Universal Trade Centre $27World Wide House $45-65Wheelock House $65-74Wing On House $38Wyndham Place FullYork House TBC

$43 - $51 psf*The Centrium 60 Wyndham Street

Units from 919 - 4,940 sq ft (G)

$42 - $45 psf*Euro Trade Centre 13-14 Connaught Road CentralUnits from 1,900 - 4,584 sq ft (G)

$45 - $50 psf*St John’s Building 3 Garden Road

Units from 3,400 - 6,800 sq ft (G)

$40 - $50 psf*8 Wyndham Street

Units from 3,585 - 5,938 sq ft (G) $42 - $45 psf*Fung House 19-20 Connaught Road CentralUnits from 2,574- 4,162 sq ft (G)

Central

Supply / Demand Central has been a very active location for office leasing over a wide variety of buildings. In the high end market, East West Bank and Vontobel Asia have just moved into Two IFC, from Gloucester Tower and Jardine House respectively. Sumitomo Mitsui Trust has leased a floor at AIA Central and Winnington Capital is also moving here from St Georges Building.

Bank of China Tower has leased space to Nanshan Capital Holdings. The landmark deal in recent months is the planned move in September 2013 by Bank of America Merrill Lynch from Citibank Plaza to Cheung Kong Center, taking some 7 floors amounting to 148,000 sq ft of space, which is one of the largest agency deals in Hong Kong for the last 10 years.

It has been the mid-range sector that has been particularly active. Man Yee Building has leased space to Vanguard Investments and one and a half floors to CFA Institute which is relocating from Exchange Square. LHT Tower has leased the last few remaining floors to the New York Stock Exchange and Heitman Hong Kong, each taking a whole floor.

Central / Mid Range ($55 - $85 psf)

*All rents quoted are estimated target effective rates subject to negotiations and are not the landlords quoted figureArea Definitions: G - Gross (70% efficiency), L - Lettable (80 - 85% efficiency), N - Net (100% efficiency)

Nearby at Prosperity Tower a whole floor has been leased to Woodsville. Wonderful Sky Financial Group leased a floor at Nexxus Building. 100 Queen’s Road Central has proved very popular where Orient Finance has moved into the top two floors, Saint Lauren has leased a whole floor and South African Airways has taken half a floor, relocating from Club Lusitano Building. Henley Building has been particularly successful in leasing out space, much of which was given up by Standard Chartered Bank. New whole floor tenants here include TOR Investment Management and Harvey Nash Hong Kong.

8 Wyndham Street has always been competitively priced and new whole floor tenants here include China Mobile Games & Entertainment Group, Halcyon Capital and Wealth Glory Holdings. 8 Queen’s Road Central has leased a floor to Canaccord Genuity Asia and further up the hill, Luxup Hong Kong has leased a floor at Club Lusitano Building.

In terms of supply there is ample choice in the high end market, healthy choice in the mid-tier market but only limited choice in the economy range below $50 per sq ft.

$60 - $70 psf*Entertainment Building 30 Queen’s Road CentralUnits from 1,746 - 6,055 sq ft (L)

$75 - $80 psf*Citibank Plaza 3 Garden Road CentralUnits from 1,415 - 48,000 sq ft (L)

Prosperity Tower 39 Queen’s Road Central

$60 - $63 psf* Units from 2,663 - 5,830 sq ft (G)

*All rents quoted are estimated target effective rates subject to negotiations and are not the landlords quoted figureArea Definitions: G - Gross (70% efficiency), L - Lettable (80 - 85% efficiency), N - Net (100% efficiency)

Central - Mid Range cont.

Central / Premium Range ($90 upwards psf)

$55 - $60 psf*

$65 - $75 psf*Man Yee Building 60 - 68 Des Voeux Road Central

Units from 2,200 - 28,258 sq ft (L)

$125 - $140 psf*

Two IFC 8 Finance StreetUnits from 2,648 - 30,642 sq ft (L)

$130 psf*CCB Tower 3 Connaught Road Central

Units from 7,419 sq ft (L)

$90 - $110 psf*Cheung Kong Center 2 Queen’s Road Central

Units from 2,138 - 9,491 sq ft (L)

Central

Units from 2,562 - 15,000 sq ft (L) $80- $83 psf*Central Tower 28 Queen’s Road Central

Wan Chai

Supply / Demand Wan Chai has quite a wide selection of buildings, but is has been the economy and lower mid-range properties that have again proved the most popular. East Town has leased a whole podium floor to Vertu. Around the corner, Jubilee Centre has leased whole floors to CES Capital and Tradecard Asia Pacific. Nearby, new tenants into Harcourt House include Hong Kong Exhibition Services, having relocated from China Resources Building, and T-Systems has also moved here from Central Plaza. New set up Crown Maritime has leased space at Dah Sing Financial Centre.

Great Eagle Centre has been busy and leased a whole floor to Manhattan Holdings, who relocated from Hutchison House. The

8 Queen’s Road East $50-5228 Hennessy Road $50-$6080 Gloucester Road $3588 Gloucester Road $30248 Queen’s Rd East $32-35Allied Khajima Building $35Asia Orient Tower $30-32AXA Centre $32BEA Harbour View Ctre FullCC Wu Building FullCentral Plaza $55-60China Hong Kong Tower $20China Online Centre $25China Overseas Bldg $33China Resources Bldg $54-60

Target Effective Rates per sq ft

Chinachem Century Twr $29Convention Pl Off. Twr $52-55Dah Sing Financial Ctre $60Fortis Tower TBCGreat Eagle Centre $58-65Harbour Centre $45-60Harcourt House $38Hopewell Centre $43-47Jubilee Centre $37Luk Kwok Centre FullMass Mutual Tower $44Methodist House FullNeich Tower FullOverseas Trust Bank Bldg $27-32Shanghai Inds.Invmt Bldg $25-29

Shui On Centre $45-60Sing Ho Finance Building $26Siu On Centre $25Sun Hung Kai Centre $54Sunshine Plaza FullTai Tung Building $32-37Tai Yau Building $34-40Tesbury Centre $33The Hennessy $30The Sun Group’s Centre TBCTung Wai Commercial Bldg FullW Square FullWing Hang Finance Ctre $32Wu Chung House $35

*All rents quoted are estimated target effective rates subject to negotiations and are not the landlords quoted figureArea Definitions: G - Gross (70% efficiency), L - Lettable (80 - 85% efficiency), N - Net (100% efficiency)

Consulate of the Netherlands has also moved into this building from Cheung Kong Center, taking over space given up by The Danish Embassy who closed their Hong Kong office. World Sport Group expanded here into their neighbour’s space, with Stemcor relocating from here to China Overseas Building. Central Plaza has attracted several new tenants including Kexim Asia who moved in from Jardine House, Lilly Jet (Hong Kong) and Worldtop Group.

Supply in Wan Chai is definitely getting much tighter and large space above 10,000 sq ft is difficult to find, but generally there are still some good choices between $30 and $50 per sq ft in the 2,000 sq ft to 6,000 sq ft range.

$32 - $35 psf*248 Queen’s Road East Units from 2,156 - 10,589 sq ft (G)

$32 - $37 psf*Tai Tung Building Fleming RoadUnits from 1,344 - 6,862 sq ft (G)

$50 - $60 psf*28 Hennessy Road

Units from 2,000 - 9,870 sq ft (L)

$55 - $60 psf*Central Plaza 18 Harbour Road

Units from 1,053 - 7,633 sq ft (L) $32 psf*Wing Hang Finance Centre 60 Gloucester RoadUnits from 1,500 - 8,000 sq ft (G)

History of Average Prime Grade A Office Rents

Contact Our Senior Team Members

Douglas Dunkerley Director License No. E-291588T +852 3752 3028 dd@corporatelocations.com.hk

Christina Lo Director License No. S-014843 T +852 3752 3027 clo@corporatelocations.com.hk

Eddie Chan Associate DirectorLicense No. S-363656 T +852 3752 3031 echan@corporatelocations.com.hk

Your Office Space, Our Jobwww.corporatelocations.com.hk

Supply Vacancy rates in many districts are already at or near historic lows

The overall vacancy rates in many districts are already at or near historic lows. The only new development on Hong Kong Island scheduled for completion in 2013 is The Forum in Exchange Square, which has been preleased to Standard Chartered Bank. Overall 70% of new supply entering the market over the next few years will be sold to strata titled owners first, so any subsequent leasing opportunities may not be ideal for large space users or international corporations who prefer buildings in single ownership.

Supply in Central may stagnate because there are still few takers for the top-of-the range buildings, but supply in other districts will definitely contract further. The vacancy rate in Central fell to around 4.7% by the beginning of this year, from 5.2% the previous quarter. We expect the rate to increase again later in the year with a large tranche of space coming available in Citibank Plaza, as a result of the Bank of America move and 200,000 sq ft of other secondary space coming available.

Demand There are signs of increased activity

There are some signs of increased activity in the market, particularly from mainland Chinese companies and some new start-ups, but this is usually for relatively small units. Demand has also been boosted by those companies who need to relocate because their current building is going to be redeveloped, such as Asian House, Somerset House and Warwick House. A lack of opportunities to lease cost effective space has prompted many companies to purchase their own space, but even these options are becoming more limited.

Rentals Landlords being very competitive in order to retain existing tenants

Average top prime Grade A rents in Central are now in the region of $98 per sq ft which is a drop of roughly 17% over the last 12 months. Top end rentals in Central are around $125 psf and mid-range are around $80 psf. Sheung Wan ranges from $25 to $50 psf, Wan Chai $30 to $55.00 psf and Island East between $20 and $40 psf. Landlords have been very competitive/flexible in their negotiations

in order to retain their existing tenants in a very slow leasing market, hence rates have softened significantly in Central.

Forecast Outside Central expect rates to firm by between 6% and 10% in 2013

It is probably just as well demand has been so weak because in such a tight supply market one would except rates to rise substantially. However, it will only be a matter of time before demand does return to healthier levels but there will still be a chronic shortage of supply for the next 3-4 years.

It will not take much of a sea change for demand to far outweigh supply

Whilst it is unlikely to happen in the next year or so, the prospects of a rental spike are clear. It will not take much of a sea change for demand to far outweigh supply. Over the next 12 months rates in prime Central are expected to soften further as landlords strive to hold onto their current tenants. In secondary locations in Central and other districts rates are expected to firm by between 6% and 10%, as supply fails to meet demand for more cost effective space.

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MARKET OVERVIEW / FORECAST

Average Prime Rents

Causeway Bay

North Point / Quarry Bay / Island East

*All rents quoted are estimated target effective rates subject to negotiations and are not the landlords quoted figureArea Definitions: G - Gross (70% efficiency), L - Lettable (80 - 85% efficiency), N - Net (100% efficiency)

$60 - $63 psf*Hysan Place 500 Hennessy Road

$38 - $42 psf*Ace Tower, Windsor House 311 Gloucester RoadUnits from 1,410 - 19,510 sq ft (G)

Units from 7,500 - 16,433 sq ft (L)

$55 - $60 psf*The Lee Gardens - Manulife Plaza 33 Hysan Avenue

Units from 3,535 - 16,544 sq ft (L)

$22 psf*101 King’s Road Units from 3,450 sq ft (G)

$30 psf*Citicorp Centre 18 Whitfield RoadUnits from 2,169 - 7,649 sq ft (G)

TBC psf*K. Wah Centre 91 Java Road, North Point Units from 1,468 - 10,000 sq ft (G)

$43 - $45 psf*City Plaza 4 12 Taikoo Wan RoadUnits from 2,943 - 23,647 sq ft (L)

Supply / Demand This location has seen reasonable activity. In the high end sector, Hysan Place has secured PPR Asia Pacific as their latest new tenant, and Kiln has moved into The Lee Gardens Manulife Plaza from Dah Sing Financial Centre. Apple has leased a whole floor (20,000 sq ft) in Times Square. Elsewhere Eli Lilly has moved from Times Square to Ace Tower/Windsor House. Sincere Watch has leased half a floor at Caroline Centre. Crown One Asset Management moved from Cosco Tower in Sheung Wan to One Hysan Avenue, and Winsmart International Shipping has leased two whole floors at East Exchange Tower, relocating from China Resources Building.

Supply in many properties is restricted to pockets of space though there are a few buildings such as Ace Tower and Times Square which offer a wide variety of sizes at different rental rates.

Target Effective Rates per sq ft

18 Hysan Ave $43-5068 Yee Wo Street $33111 Leighton Road $42ACE Twr / Windsor Hse $38-42Cigna Tower FullChina Taiping Tower $34Caroline Centre $45-53Causeway Bay Pl1 & 2 $30-35Chinachem Leighton Pl FullEast Exchange Tower $30Guardian House $25Hang Lung Centre $45

Hysan Place $60-63Lee Gardens Manulife Pl $55-60Leighton Centre $36-38Lippo Leighton Tower FullOne Hysan Avenue $38-40Sino Plaza $39-45Sunning Plaza FullTimes Square Tower 1 $52-56Times Square Tower 2 $52-56Top Glory Tower $45World Trade Centre $48-53

*All rents quoted are estimated target effective rates subject to negotiations and are not the landlords quoted figureArea Definitions: G - Gross (70% efficiency), L - Lettable (80 - 85% efficiency), N - Net (100% efficiency)

Target Effective Rates per sq ft

101 King’s Road $22148 Electric Road $24-28169 Electric Road $28-33AIA Tower $40-42China United Centre Full

Citicorp Centre $30Island Place Tower FullK. Wah Centre TBCOlympia Plaza $20Two Chinachem Ex Square $18

Fortress Hill / North Point

Supply / Demand North Point and Quarry Bay is still one of the most active locations because this is the area that offers the widest range of economy options, allowing companies even in lower mid-range buildings to save costs. The headline deals recently in this location include Convey Financial Group leasing 4 floors at 169 Electric Road, and Mass Mutual Assurance leasing 2 floors at Olympia Plaza. Maxims Caterers have also leased 6½ floors at 1063 King’s Road and will be relocating from Somerset House. Sinopec has taken a whole floor at Citicorp Centre and Hayco has also recently moved here.

Several new tenants have moved into Island Place Tower including FCM Travel Services, Shougang Concord Technologies (from Admiralty Centre) and Environ Hong Kong from China Resources Building. 101 King’s Road has been offering very competitive rental packages and new tenants here include Senco Masslink Technology, from 248 Queen’s Road East, and Medinet Holdings from Citicorp Centre.

In the higher end properties in Island East, Emirates Shipping has just moved into Kerry Centre, and CBAT International has leased a whole floor at Oxford House. Dorset House attracted The Wrigley Group, which is consolidating its operations combining the offices in Bank of China Tower and 169 Electric Road into this one location. Right Management has also moved here from Bank of America Tower.

$24 - $28 psf*148 Electric Road

Units from 1,256 - 8,256 sq ft (G) $28 - $33 psf*169 Electric Road Units from 1,570 - 10,532 sq ft (G)

$22 - $25 psf*E-Trade Plaza 24 Lee Chung Street, Chai Wan

Units from 1,465 - 23,279 sq ft (G) $55 upwards psf*One Island East 18 Westlands RoadUnits from 10,000 - 21,000 sq ft (L)

625 King’s Road $27633 King’s Road $301063 King’s Road FullCambridge House $43-45Chinachem Exchange Sq FullCityplaza 1 $43-45Cityplaza 3 FullCityplaza 4 $43-45Cornwall House $24E-Trade Plaza $22-25DCH Commercial Ctre $34-$36Devon House Full

Quarry Bay / Island East

Dorset House $43-45Kerry Centre FullKodak House 2 $18Lincoln House FullOne Island East $55Oxford House $43-45PCCW House $40-45Prosperity Millennia Pl $28-30Somerset House TBCStanhope House TBCWarwick House TBC

North Point / Quarry Bay / Island East Cont.

*All rents quoted are estimated target effective rates subject to negotiations and are not the landlords quoted figureArea Definitions: G - Gross (70% efficiency), L - Lettable (80 - 85% efficiency), N - Net (100% efficiency)

Tsim Sha Tsui / Mong Kok

Kowloon Bay / Kwun Tong

Kowloon

Effective Rates per sq ft

Tsim Sha Tsui

113 Argyle Street TBCGrand Century Pl T1&T2 $30-33Langham Place $32-36Pioneer Centre FullPark In Commercial Centre $24

Mong Kok

26 Nathan Road $50-55China Hong Kong City $26-30Concordia Plaza $34Empire Centre $34Energy Plaza $26Harbour City Old Blocks $32Int’l Commerce Centre $70-78Lippo Sun Plaza $30Miramar Tower $35-43New East Ocean Centre $27Ocean Centre $32-38One Peking Road $60Railway Plaza $23Silvercord Tower 1 & 2 $30-35The Gateway Tower 1 $35-38The Gateway Tower 2 $39-47

The Gateway - Sun Life $42The Gateway - Pru Tower FullThe Gateway II Tower 6 $40-54Tsim Sha Tsui Centre $35

Hung Hom One Harbourfront $25-28Two Harbourfront $23-26The Metropolis Tower $31-34

Kowloon Commerce Centre $24-27Metroplaza Tower 1 & 2 $24-25Nina Tower FullPaul Y Centre $15-20

Others

Billion Centre $18-19Enterprise Square T1-3 $20Enterprise Square Two FullEnterprise Square Three FullEnterprise Square Five $32Exchange Tower $23-27Manhattan Place FullOne Kowloon FullOCTA Tower $25Skyline Tower $20

Kowloon Bay

AIA Kowloon - Landmark $28-34AXA Tower - Landmark East $27C-Bons International Centre $25Crocodile Centre $30-32King Palace Plaza $20Kwun Tong View $20Manulife Financial Ctre $25-28MG Tower $16-20Millennium City 1 - T1 $27-30Millennium City Stan Ch FullMillennium City 2 $24-27Millennium City 3 $24Millennium City 5 - BEA $33Millennium City 6 FullOne Pacific Centre $28-30

Kwun Tong

$23 - $27 psf*Exchange Tower 33 Wing Chiu Road, Kowloon Bay

Units from 1,000 - 18,108 sq ft (G) $20 psf*Skyline Tower 39 Wang Kwong Road, Kowloon BayUnits from 1,000 - 12,462 sq ft (G)

$28 - $30 psf*One Pacific Centre 414 Kwun Tong Road

Units from 4,250 - 19,000 sq ft (G) $27 - $30 psf*Millennium City Tower - Tower 1 388 Kwun Tong RoadUnits from 1,011 - 13,503 sq ft (G)

$35 - $52 psf*The Gateway 25 Canton RoadUnits from 1,674 - 23,399 sq ft (G)

$30 - $33 psf*Grand Century Place Twrs 1 & 2 193 Prince Edward Road WestUnits from 1,237 - 8,522 sq ft (G)

$32 - $36 psf* / Units from 5,274 - 17,398 sq ft (G)Langham Place 8 Argyle Street